utilfn - Notes on the Utility Function used in the...

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Notes on the Utility Function used in the Monopolistic Competition Model The utility function is: 4 u(q , q ) = G q , where 0 < " <1. 1 2, . ......... i " i=1 This function is sometimes called the “love for variety” utility function. Example 1: Assume that there are four varieties available and that " = 1/2 . Suppose the agent can consume a total of 16 units. We will show that the agent will be happier consuming 4 units of each of the commodities than 8 units of only two commodities or 16 units of a single commodity.
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This note was uploaded on 05/15/2008 for the course ECON 467 taught by Professor Muniagurria during the Summer '06 term at University of Wisconsin.

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